Canadian Dollar

It is not clear that an EW approach to the value of a currency should work. It certainly was not part of the pragmatic studies undertaken by R.N. Elliott on which he based his findings. Currencies represent relative values that just might not behave the way stocks do. To me it has never been clear how 5-waves up in C$$ can, at the same time, be 3-waves down in US$$. The pattern must be identical regardless of whether you are in Toronto or New York.

Fortunately we have the Toronto Star to help us out. I had watched the Governor and his deputy take great pains to avoid the R- word. Even if we had had two or three quarters with no or negative growth, we still did not have a recession so the story went and it would be counter productive to talk about that which did not exist. It was painful to watch. David Olive of the Star was pretty blunt in his comments on the merits of the rate cut itself, quote “It is now clear Poloz has not yet attained a sufficient grasp of markets and global economics required of the central banker of a country that is so thoroughly integrated with the world economy” unquote. Not much deference here!

For the vast majority of Canadians a lower dollar makes almost everything more expensive, even gas for the car when the oil is extracted from Canadian soil. It tends to increase income inequality. We do not have much manufacturing left and most of it is for goods that are demand inelastic so the dollars drop provides little or no extra incentive. Most importantly it sends the wrong message. For the moment the market assumes we will get another rate cut so the situation is a little out of control. My guess is 1.35 or about 74 cents should do it.